The Global Economic Environment

1
The Global Economic Environment

• Chapter 2
• Global Marketing

2
Changes in the World Economy

• Emergence of global markets
• Integration of world economy
• Increased volume of capital movements
• End of the Cold War
• Diminishing importance of national boundaries due
  to technological advancements

3
Economic Systems

• Market capitalism
• Centrally planned socialism
• Centrally planned capitalism
• Market socialism

4
Economic Systems
Resource Allocation
Market Command
Centrally Planned Capitalism
Private Resource Ownership State
Market Capitalism
Centrally Planned Socialism
Market Socialism
5
Market Capitalism

• Economic system in which individuals and firms
  allocate resources
• Production resources are privately owned
• Consumers decide what goods are desired and firms
  determine what and how much to produce
• Role of state is to promote competition and
  protect consumers

6
Centrally Planned Socialism

• Opposite of market capitalism
• State holds broad powers to serve the public
  interest decides what goods and services are
  produced and in what quantities
• Consumers can spend on what is available
• Government owns entire industries
• Demand typically exceeds supply
• Little reliance on product differentiation,
  advertising, pricing strategy

7
Centrally Planned Capitalism

• Economic system in which command resource
  allocation is used extensively in an environment
  of private resource ownership
• Examples
• Sweden
• Japan

8
Market Socialism

• Economic system in which market allocation
  policies are permitted within an overall
  environment of state ownership
• Examples
• China
• India

9
Degrees of Economic Freedom

• Free
• Hong Kong
• Singapore
• Ireland
• New Zealand
• United States
• United Kingdom
• Netherlands
• Australia
• Switzerland

• Repressed
• Bosnia
• Vietnam
• Laos
• Iran
• Cuba
• Iraq
• Libya
• North Korea
• Congo

10
BEMs Big Emerging Markets

• China
• India
• Indonesia
• South Korea
• Brazil

• Mexico
• Argentina
• South Africa
• Poland
• Turkey

11
Low Income Countries

• GNP per capita of 785 or less
• Characteristics
• Limited industrialization
• High percentage of population involved in farming
• High birth rates
• Low literacy rates
• Heavy reliance on foreign aid
• Political instability and unrest
• Of these, only China and India are BEMs

12
Lower Middle Income Countries

• GNP per capita between 786 and 3,125
• Sometimes called less-developed countries (LDCs)
• Characteristics
• Early stages of industrialization
• Cheap labor markets
• Factories supply items such as clothing, tires,
  building materials, and packaged foods
• 3 BEMs Poland, Turkey, Indonesia

13
Upper Middle Income Countries

• GNP per capita between 3,126 to 9,655
• Characteristics
• Rapidly industrializing
• Rising wages
• High rates of literacy and advanced education
• Lower wage costs than advanced countries
• Sometimes called newly industrializing economies
  (NIEs)
• 3 BEMs Argentina, Brazil, Mexico, South Africa

14
High Income Countries

• GNP per capita above 9,656
• Sometimes referred to as post-industrial
  countries
• Characteristics
• Importance of service sector, information
  processing and exchange, and intellectual
  technology
• Knowledge as key strategic resource
• Orientation toward the future

15
G-7 Countries

• Leaders from these high income countries work to
  establish prosperity and ensure monetary
  stability
• United States
• Japan
• Germany
• France
• Britain
• Canada
• Italy

16
The Triad

• Dominant economic centers of the world
• Japan
• Western Europe
• United States
• Expanded Triad
• Pacific Region
• North America
• European Union

17
Leading Exporters and Importers

• Exporters
• United States
• Germany
• Japan
• China
• France
• United Kingdom
• Canada
• Italy

• Importers
• United States
• Germany
• United Kingdom
• France
• Japan
• Netherlands
• Canada
• Italy